With each passing year, small businesses have more and more options for loans. No longer are bank loans the only (or even the best) choice for small business owners who need a little extra capital. Alternative small business lenders offer an option for businesses who were either denied by the bank, or need funding fast, to get the cash they need.

If you are considering applying for a non-bank loan, there are a few questions that you should be prepared to answer.

By having the answers already on-hand, it will help you appear as a responsible lender who has all the details under control. Not to mention, it will help you save you time and stress during the process.

Question #1: Who are you?

In the “getting to know you” phase, the lender is trying to verify you and your business. You will want to have on-hand:

  • Some form of ID to prove who you are. This can be a driver’s license, a non-driver’s state ID, a passport, or any photo ID that would be accepted by a bank or other official institution.
  • Your EIN (Employer Identification Number), or tax ID number, which will verify your business’s identity.
  • And proof that you own the business. This should include a business license and proof of ownership, or a franchise agreement if applicable.

Question #2: Will you be able to repay the debt?

Any small business lender wants to know first and foremost that your business will be able to repay the debt. Alternative lenders will assess this differently than a bank would, but they will still need most of the documents you’d expect a bank to request.
To make sure you’re financially healthy, a lender might ask for:

  • Balance sheets, including year-to-date and the past 2 fiscal years.
  • Profit & loss forms (otherwise known as Income Statements), which should also be year-to-date and the 2 prior fiscal years.
  • Tax returns: personal for the previous year and business for the 2 prior fiscal years. If you filed an extension, make sure you’re able to prove this with the necessary paperwork.
  • Business bank statements for the past 4-6 months, or 12 months if your business is seasonal.

Question #3: Who else do you owe money to?

The small business lender will also want to know about your current outstanding debts. You might need to provide:

  • A business lease. Some lenders will call your landlord to ensure you’re in good standing.
  • Rent or real estate schedule.
  • Business debt schedule, including outstanding loan amounts, monthly payments, and whether you plan to pay off this debt with the new loan you are requesting.

Question #4: Do you have anything that could secure the debt?

Depending on the lender’s policies, they may also want to know what collateral you have. Unlike banks, many small business lenders will not exclude you based only on collateral, but they still might want to see the details of your situation. You should have on hand:

  • Real estate/inventory/equipment valuation. If you have additional real estate you’re willing to pledge, you may need to provide a recent environmental report.
  • If applicable, your latest accounts receivable aging statement. Be sure it includes details of who your customers are.

Keep in mind that every lender is different. Some will require more paperwork, while some will require very little. However, you shouldn’t “shop” lenders based on the amount of paperwork involved. You should focus on factors like time to funding, repayment period, applicable fees and interest rates.

Although alternative lenders have made the overall process of getting a small business loan simple and fast, putting together a loan application still requires some preparation. By preparing all of the paperwork needed for your loan ahead of time (or at least ensuring you know exactly where to go to get it if asked for) is the best way to avoid delays in processing your application and get you the cash you need fast.

About the Author(s)

Meredith Wood

Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer.

Editor-in-Chief, Fundera